Myths about Dynamic Pricing

A Note from Kathryn, Partner Enablement & Analytics

Before my current role at Liftopia, leading our Analytics & Enablement team, I spent the previous 18 months introducing our Cloud Store solution and pricing model to new markets and verticals. This included new geographies like Switzerland, Germany, France and Austria, and new markets such as water parks and attractions. Between the trade shows, such as IAAPA and Interalpin, in-market visits with my team, and listening to prospective client feedback, I heard a lot of similar questions and misconceptions about dynamic pricing. Resorts and attractions repeatedly shared their concerns and fears about what would happen if they made the change to a dynamic pricing strategy in order to grow pre-sales. So, I thought I would share and clarify some of what I’ve learned and experienced as it relates to a few of these common questions and concerns.

Belief #1: “Dynamic Pricing will erode my yield”

Debunked: I hear this concern all the time. Implementation of a dynamic pricing strategy to drive pre-sales actually enables many of our partners to increase their yield, as they get rid of “unfenced” discounts (think a Groupon that can be used any time) and maximize revenue on their best days. Many of these unfenced discounts end up getting used by customers on peak days, leading to low yield on days that should really be the most profitable. By eliminating these types of discounts, offering the right price for the right person at the right time, and driving visitation and revenue with dynamic pricing, yield can actually rise. For a specific example, please take a look at our case study on Gulf Islands Waterpark. They saw per cap in their first season of dynamic pricing increase by 38%.

Belief #2: “My customers won’t know to buy this way”

Debunked: Don’t knock it ‘till you try it. From airline tickets to hotel rooms and sports tickets, customers are used to paying a different price depending on when they purchase, the date they want to travel or visit and the popularity of that date. While I’ve heard this concern many times, our partners are often surprised to discover that customers are actually used to buying this way, and their experiences with purchasing in other industries makes adoption seamless. More importantly, part of a successful implementation of dynamic pricing for pre-sales is clear customer communication. If customers are regularly and clearly told that the price they pay varies day to day, and to always “buy in advance and save” if they want the best value, they quickly adapt to dynamic pricing as the norm. Communication and messaging of dynamic pricing strategies through your marketing, email and site experience is something our team can help with during the implementation process.

Belief #3: “My customers might be upset if they paid a different price from someone else”

Debunked: Similar to the point above, if resorts clearly and regularly communicate with their customers about how dynamic pricing works, customers expectations will align with their strategy. As long as a customer understands why they paid the price for their ticket (when they bought, and the date they bought for), they are unlikely to be upset if the customer next to them in line paid a different rate. For comparison, if you pulled into the parking lot and booked your hotel the night of your stay, would you be upset that the customer who booked three weeks earlier got a better deal? Likely not. In addition, customers at a ski resort or amusement park at any given time are likely to have paid different rates from one another already between group sales, season passes, comp tickets, “bring-a-friend” deals, etc.

Belief #4: “I need one-system to do everything”

Debunked: While it is tempting and rationale to desire a single technology system to handle all of the needs across your resort or attraction (e.g. ticket sales, CRM, POS, birthday party sales, accounting, etc.), the reality is that you won’t get best-in-class for each of your needs if you rely on a single system. Modern technology is built to enable companies to stitch together best-in-class components so they can get the optimal solution for their specific situation in each category. At our company we use Google for email, Microsoft for productivity, Slack for communications and Salesforce.com for CRM. The quality of individual solutions that each of these provide far outweighs the ease of using the same tools from one vendor like Microsoft or Google. And with light integration and process change these tools work.

Overall, when a dynamic pricing strategy is implemented carefully and strategically, both businesses and their customers will see great results. We’d be happy to spend more time addressing any additional concerns not mentioned above. Contact us at partners@liftopia.com.